Bank of Ireland to cut up to 1,500 jobs

BANK OF Ireland has signalled that between 1,000 and 1,500 more jobs may have to go to reduce costs and reflect its reduced size, but the lender has ruled out any branch closures.

Richie Boucher, chief executive of Bank of Ireland, would not be drawn on the exact number of redundancies being sought by the bank, but said costs would have to be cut by a third to €1.5 billion by 2014 from their peak in 2009.

The bank, which is 15 per cent owned by the State, had close to 16,000 employees at that time but has since reduced staff numbers by 3,700, which could mean up to 1,500 more jobs are at risk.

Mr Boucher said the bank would base the decision on costs rather than actual staff numbers, as measuring cost cutting by reducing staff can be “deceptive”.

“A headcount thing is an important measure but it isn’t the only measure. It is actually reducing the full cost. You could have one highly paid person for four people at a lower paid level,” he said.

The bank set aside a €66 million provision to cover job cuts as it restarts its redundancy programme. The decision to cut jobs would be based on a business-by-business review, said Mr Boucher.

He rejected the suggestion that this method would feed uncertainty among staff rather than saying the number of staff to go.

“If you come out with some dramatic number, then everyone is spending six months around coffee machines wondering who is next, am I going to get it?” he said.

Mr Boucher said the bank did not intend closing any of its 254 branches as it needed them to sell products to customers to increase its revenues. The lender would instead reduce costs by changing work being done in the branches.

The bank’s shares fell 3 per cent to 9.5 cent yesterday after Mr Boucher said it would be “very challenging” for the bank to meet its target net interest margin, the difference between what it pays for funding and charges for loans, of 2 per cent by 2014. The margin fell to 1.2 per cent in June from 1.33 per cent a year earlier.

Including the cost of the guarantee scheme, the margin was 0.88 per cent in the first half of the year down from 1 per cent in June 2011.

The bank’s pretax loss more than doubled to €1.25 billion in the first half on the same period last year. Operating profit, before bad loan charges and other items, fell 65 per cent to €58 million.

Loan impairment charges rose to €941 million from €842 million due to the charge for bad residential mortgages almost doubling to €310 million from €159 million.

The number of impaired mortgages rose by 61 per cent to €2.4 billion over the six months, while the number of properties repossessed increased by just 34.

Mr Boucher said the bank would take action on mortgages that customers could not afford but it would work with customers first to find amicable solutions. “It is a regrettable but unfortunate fact of life that repossessions are going to increase,” he said.

He described as “an isolated case” the write-off of €152,000 in mortgage debt owed by Dublin nurse Laura White last April.

Arrears of 90 days or more on owner-occupier mortgages rose to 7 per cent on June 30th from 5.6 per cent six months earlier, while buy-to-let mortgage arrears rose to 14 per cent from 10.8 per cent.

Total impaired loans increased to €15.4 billion or 15 per cent of total loans at the bank at the end of June from €13.5 billion or 12 per cent at the end of last December.

Asked whether the bank had, like AIB, misreported arrears cases to the Irish Credit Bureau, Mr Boucher said that based on a review he had requested he “didn’t think that is an issue” for the bank.

On potential computer problems, such as those recently experienced by Ulster Bank, Mr Boucher said that Bank of Ireland had invested in “disaster recovery systems”.